The Correlation Between Bitcoin and Tech Stocks
A graph circulating on X suggests that the correlation between the price of Bitcoin and technology stocks has dropped to zero. The graph, reportedly from Bloomberg, shows that the correlation reached a high of 0.40 in recent months but has now returned to zero. However, when comparing the past month, it is evident that there is still some correlation between the Nasdaq index and Bitcoin prices. In the last 30 days, the NDX index grew by 6% while BTC grew by 15%. The correlation becomes more positive when considering annual trends, with Nasdaq recording a +54% increase and BTC at almost +160% in 2023.
The Variations in Correlation
According to Bloomberg’s chart measuring the 60-day correlation level, there have been significant variations over time. The correlation between Bitcoin and technology stocks reached a peak of almost 80% in mid-2022 but dropped to less than 40% in the previous year. Since the end of 2022, the correlation has been decreasing rapidly, reaching as low as zero in recent months. However, it is possible for the correlation to rise slightly in the coming weeks due to positive correlations observed in December. It should be noted that currently, the correlation is slightly below zero.
The Difference Between Nasdaq and Bitcoin
One notable difference between Nasdaq and Bitcoin is their performance in December. While Nasdaq reached new all-time highs and recovered from last year’s bear market losses, Bitcoin is still down 38% from its November 2021 highs. This difference can be attributed to the fact that Bitcoin experienced greater losses in 2022 and did not recover significantly from March to July. Moreover, AI-related stocks had a positive impact on Nasdaq but not on Bitcoin. Additionally, the movements of both Nasdaq and Bitcoin have shown an inverse correlation with the Dollar Index.
Reasons for the Correlation
The main reason behind the correlation between Bitcoin and Nasdaq is their shared risk-on nature as investments. When investors show a preference for risk-on assets, both stocks and Bitcoin tend to attract more interest. This trend is similar to the behavior of gold prices in the past two years, where it declined in 2022 but rose in 2023. It is also worth noting that the S&P500 index has followed a similar pattern to Nasdaq, indicating that the US stock market as a whole has moved inversely to the Dollar Index. Despite the recent zero correlation, a potential retracement in the Nasdaq could still impact Bitcoin’s price.
Hot Take: The Correlation Between Bitcoin and Tech Stocks Drops to Zero
According to a graph circulating on X, the correlation between Bitcoin and technology stocks has dropped to zero. This suggests a decoupling between these two assets, as their price movements are no longer closely linked. While there have been variations in correlation over time, recent trends indicate a lack of connection between Bitcoin and tech stocks. However, it is important to note that correlations can change in the future, especially if there is a retracement in the stock market. Investors should continue to monitor these relationships and consider them when making investment decisions.
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